Fed Up With Your Homeowners Insurance? Here’s How You Can Find Better Coverage

There are a variety of reasons a homeowner might want to change their homeowners insurance. Perhaps they’re looking to get a lower rate, or their insurance company may no longer offer coverage in their area. Or maybe they’re researching what the best homeowners insurance companies (like Allstate or Lemonade) offer that their current provider does not. Even if a homeowner isn’t actively looking to switch policies, it helps to know how to change homeowners insurance policies in case they need to in the future.

There are generally only a few steps involved for switching homeowners insurance. However, those who have a mortgage or escrow account may find there are a few extra steps they’ll need to complete when they’re researching how to change home insurance policies.

STEP 1: Check your existing policy’s terms and conditions.

Before changing home insurance companies, it’s a good idea to check an existing policy’s terms and conditions thoroughly. This step helps homeowners understand the potential risks of changing insurance companies, such as unexpected penalties or fees. While homeowners have home insurance cancellation rights—meaning they can cancel their policy when they want—many home insurance companies charge a fee for early cancellation. There are generally clauses in policies related to cancellation, and this is where insurance companies tend to list penalties or fees. If possible, it’s typically best to wait until close to the policy renewal date to change homeowners insurance, as this could help avoid early cancellation penalties.

In addition to helping homeowners better understand their current home insurance cancellation policies, reviewing their insurance can help them better understand their current coverages, rates, and any discounts. It’s a good idea to make note of any discounts—especially bundling or loyalty discounts—that a current insurance provider offers before switching insurance companies.

STEP 2: Review your current policy and consider your coverage needs.

Homeowners can better understand their existing homeowners insurance coverage by reviewing their policy carefully. Many who are researching how to switch home insurance policies are looking for similar coverage from a different provider. Knowing their policy’s coverages and exclusions can help them accurately compare quotes from other companies with their current coverage.

A good place to start is by looking at the declarations page of the policy. The declarations page is an overview of the insurance policy and provides vital details such as the type of homeowners insurance a homeowner has, what their homeowners insurance covers, their premiums, and their deductibles. Homeowners may then want to dive into the specifics of their policy, including coverage for the dwelling, personal property, liability, and additional living expenses. Additionally, those who have expensive jewelry, sports equipment, musical instruments, or other property that has limits on coverage may have endorsements to more fully protect these items. Once the homeowner understands their current policy, they can consider what coverage they want to keep or change. For example, someone who has purchased several high-value items since their original policy went into effect may need additional coverage in their new homeowners insurance policy.

STEP 3: Research different homeowners insurance companies.

Finding a new insurance company that’s a good fit is one of the most important factors to consider when changing home insurance. Although many home insurance companies offer comparable coverage options, each company has unique benefits and drawbacks that could affect a homeowner. For example, those who have served in the military may want to research the best homeowners insurance for veterans. Such companies often offer military discounts or coverage that caters to military families. It’s wise to look at more than just the price of coverage when comparing companies, such as policy coverage options, any exclusions, and whether the company offers coverage where they live.

When looking at different insurance companies, it’s a good idea to make a list of the factors that are most important. This might include coverage options, cost of homeowners insurance, or availability of discounts and bundling options. It’s also helpful to research the companies that offer the coverage a homeowner needs. Reading reviews, looking up AM Best ratings and other financial strength ratings, and contacting an insurance agent for each company can provide a better idea of whether the company is a good fit for their needs. Someone who doesn’t consider themselves tech-savvy, for example, might not want to choose a home insurance company that operates exclusively by mobile app.

STEP 4: Compare quotes and coverage against your existing policy.

After narrowing down the list of potential insurance companies, it’s time to start collecting quotes from the top choices. Getting quotes from multiple carriers is an important step during the process of shopping for home insurance. Having quotes from several different companies makes it easier to quickly compare companies based on coverage options and price. However, for the most accurate comparison, it’s best to look carefully at each quote to ensure the quotes all offer similar coverage options.

Additionally, it’s wise to compare collected quotes against an existing insurance policy before homeowners change their insurance company. This process generally involves checking the quotes to see if they offer similar (or enhanced) coverage to what’s already in place. It’s recommended to look particularly closely at the coverage limits and exclusions between policies. Comparing quotes with their existing coverage can also help homeowners determine whether switching insurance companies will help them save on insurance costs while maintaining the coverage they need.

STEP 5: If you have a mortgage, check the mortgagee clause for your lender.

It’s recommended that homeowners with a mortgage first check the mortgagee clause for their lender before changing homeowners insurance. The mortgagee clause is a provision in the homeowners insurance policy that protects the lender’s interest in the property. The clause ensures that any insurance payouts for damages or losses are made jointly to the homeowner and the mortgage lender or directly to the lender. Before making any changes to a homeowners insurance policy, it’s wise to review this clause and understand the lender’s insurance requirements. Lenders often have specific criteria for insurance coverage, such as minimum coverage amounts and acceptable types of coverage.

Homeowners can generally notify their lender about their intentions to change insurance providers. This gives the lender time to inform the homeowner about any insurance requirements and lets the lender approve a new policy before the homeowner signs a contract. Those who switch insurance will want to notify their lender of the change. If a lender gets a cancellation notice from the previous insurance company and isn’t notified that a new policy is in effect, it has the right to purchase a policy to ensure the home is protected in the event of a loss. These lender-placed policies are often expensive and don’t cover liability or personal items, and the cost is added to the monthly mortgage payment.

STEP 6: Choose the best policy and sign the paperwork.

Once shoppers have compared quotes and verified their coverage requirements with their lender, they can then choose a new policy. To secure the new policy, it’s best to contact the insurance company directly or work with the insurance agent who provided the insurance quotes. Homeowners can let the company know which policy quote they’d like to move forward with, and the insurance company will prepare an insurance contract for the homeowner to sign.

It’s wise to carefully review the terms and conditions of the new policy before signing the paperwork. Reviewing the terms includes reading through the entire policy document to make sure coverage details, policy limits, and exclusions are clearly understood. It’s also a good idea to check to ensure any special limits or policy endorsements requested were added to the policy. If everything is in place as requested, the homeowner can sign the paperwork to officially secure their new home insurance coverage on the listed effective date.

STEP 7: Cancel your current homeowners insurance policy.

After obtaining a new policy, it’s not unusual to wonder how to cancel homeowners insurance from a previous company. It’s important to cancel the old policy to avoid overlapping coverage and the unnecessary expense of paying a double premium. It’s best to confirm the new policy is active and all documentation is in place before canceling the current policy. Skipping this step could lead to a lapse in coverage if the new policy hasn’t yet taken effect. If something were to happen to the home during the lapse, such as a wind storm causing damage to the roof, homeowners would have to pay out of pocket for any damage that occurs.

When the new coverage is in place, it’s best to call the existing insurance company to ask about the cancellation process. Many insurance companies use a cancellation form to cancel coverage. Some insurance companies may also require written notification requesting cancellation. Homeowners may want to ask the insurance company for written confirmation that their policy has been canceled and won’t be renewed.

STEP 8: If applicable, let your lender know about the change ASAP.

Mortgage lenders have a vested interest in the properties that they loan money to buy. The home insurance on a property helps lenders secure their investment in case of a covered peril such as fire or wind damage.

It’s wise to notify the lender as soon as possible after the change of coverage. This helps homeowners stay compliant with the terms of their mortgage. Failure to notify the lender of the change could lead to complications between the homeowner and lender. Most notably, many lenders will purchase third-party coverage for borrowers if they receive notice that an insurance policy is canceled without replacement coverage. This insurance coverage is generally much more expensive than the policy a homeowner can buy on their own, so it’s in the homeowner’s best interest to let their lender know when they have a new policy.

STEP 9: Send any refunds from your previous insurance provider directly to your escrow account, if you have one.

There’s one last step to complete while going through the process of how to change insurance companies. That step is taking care of any refund from the previous insurance provider and sending it directly to the escrow account. The escrow account collects funds to pay for property taxes and homeowners insurance. These funds are collected in monthly installments along with the homeowner’s monthly mortgage payment, and property taxes and insurance premiums are paid from this fund. This simplifies the mortgage, taxes, and insurance payments for the homeowner.

Some homeowners may receive a refund from their previous insurance company after switching. Generally, refunds are prorated based on any unused premium payments. Instead of depositing this refund into a personal account, it’s best to send it to the escrow account. Sending the refund to the escrow account can ensure there are ample funds to cover the new insurance premiums. When there’s an “escrow shortage,” or not enough funds in the account to pay for the new premium, it falls on the homeowner to make up the difference. This can result in a higher monthly mortgage payment.

Switching insurance providers can often help shoppers find a policy that fits their coverage needs and budget where their previous coverage fell short. But there are several steps to take when changing providers—especially if there’s an active mortgage. Following these steps can ensure homeowners remain compliant with their lender’s terms and maintain coverage with no lapses.